Retirement

Don’t Miss Out on Your Money: Redefining Risk Management

By Shane Barber

October 22, 2021

Don’t Miss Out on Your Money: Redefining Risk Management

Key Points – Don’t Miss Out on Your Money: Redefining Risk Management

  • Missing Out on Your Money Is Tragic
  • How Do We Redefine Risk Management?
  • Risk, Loss, and Fear
  • Three Critical Questions about Risk Management
  • Good Fear vs. Unhealthy Fear
  • 10 Things We All Value That We Can Lose Due to Fear
  • 36 Minutes to Read

Missing Out on Your Money Is Tragic

One very stark reality of our business, particularly in the market segment we serve, is that we regularly lose people we know and deeply care about. We often know or sense that the loss is imminent, but other times it comes out of nowhere. When it comes out of nowhere, it’s almost universally an early and unanticipated passing that catches the surviving spouse, family, friends, my colleagues, and I completely off guard. The impact of the tragedy multiplies.

This year has been especially difficult for me in that regard. I lost several clients who were very special to me early in the year, most of whom were far too young to leave this life. They never had the chance to do what they dreamed about, planned for, and saved for during their working lives. Every one of them missed out on their money—not by choice, but by fate.

Sadly, I watch too many people who are blessed with a full life miss out on their money as well. It’s not by fate, but by choice. Whether or not they realize it’s a choice is equally as tragic. Maybe it’s because I’m getting older, or maybe it’s the cumulative nature of seeing this movie play itself out repeatedly that finally compelled me to address this issue with you all.

Life is unbelievably short. It breaks my heart to see people waste their time worrying about things they can’t control. I’m passionate about putting an end to that. I don’t want you or anyone else to limit the enjoyment of the time we’ve been given. Maybe you’ll have a different perspective about that by the end of this article. Or might know someone who needs to hear this message, in which case you should share this article with them.

How Do We Redefine Risk Management?

To mitigate the occurrence of people missing out on their money in retirement, it’s necessary to redefine risk management. There are three tangible factors that cause people to miss out on their money. They are:

  • Perception of risk.
  • Perceived potential for loss.
  • The fear of both.

For us to redefine risk management in a more meaningful way, we first need to understand risk, loss, and fear with how they are traditionally defined in the financial world. Then, we need look at how they affect the psychology of an individual where their money is concerned. And finally, we’ll examine the potentially detrimental effects that these factors have on human behavior when it comes to family, relationships, and lifestyle.

Understanding these things will allow us to address them and take deliberate action to minimize the potential damage. The results may not come overnight, but they will over time.

Let’s get started with some definitions so you don’t miss out on your money.

“The Greatest Danger in Life is that We Aim Too Low and Reach It.” – Michelangelo

Risk

We’ll start with the definition of investment risk since it tends to be the most clinical. Webster’s Dictionary defines investment risk as, “The chance that an investment will lose value.”

That is absolutely accurate. There is a chance, however, large or small, that ANY investment will lose value, no matter how safe it’s perceived. Historically, safe money market funds fell below their typical price of $1 a share in 2008 during the financial crisis. That proved the point that ANY investment might go down in value at some point. It doesn’t mean they will; just that they can.

The tendency to focus solely on this definition of risk is a dangerous one, which can potentially lead to the problem of missing out on your money. Consider these other definitions of risk:

  • The possibility of loss or injury.
  • Someone or something that creates a hazard.
  • A hazard from a specified cause or source.
  • At risk — In a state or condition marked by high levels of susceptibility.
  • To risk — To expose to hazard or danger or incur the risk or danger of.

These definitions all generally refer to the potential for loss or a hazard that we should potentially be fearful of. It’s not a coincidence that risk, loss, and fear are the three factors we’re discussing here. As you are beginning to see, they are inextricably linked to one another.

Loss

The investment definition of loss is equally as sterile as the one for risk. Webster’s refers to investment loss as, “The amount by which the purchase price exceeds the selling price” or “Decrease in amount, magnitude, value, or degree.”

That’s very clinical. However, I previously referred to loss in a much different context—the loss of life. Obviously, that’s a much bigger deal than the loss of value in an investment. The word loss has a wide range of contextual definitions. Let’s look at some of those.

  • Destruction, ruin.
  • The act or fact of being unable to keep or maintain something or someone.
  • The partial or complete deterioration or absence of a physical capability or function.
  • The harm or privation resulting from losing or being separated from someone or something.
  • A person or thing or an amount that is lost.
  • Failure to gain, win, obtain, or utilize.
  • Decrease in amount, magnitude, value, or degree (I know it’s in here twice).
  • Something that is lost.
  • The state of being deprived of or of being without something that one has had.
  • A thing or several related things that are lost or destroyed to some extent.
  • Failure to preserve or maintain.
  • Failure to make good use of something, as time; waste.
  • Uncertain as to how to proceed.
  • Detriment, disadvantage, or deprivation from failure to keep, have, or get.

To me, it’s inarguable that those 14 definitions are far more impactful than the clinical definitions for the financial meaning of loss. It’s not an overstatement to say that they have a more profound impact on us as sentient human beings.

Nobody wants to experience loss unless it’s excess weight around their mid sections. We certainly don’t want to expend energy creating loss. We actively avoid loss until we don’t/can’t. Sadly, loss is often self-inflicted.

Fear

That reality brings us to the third factor—fear. There is no real financial definition of fear, but rather financial consequences that arise from ceding to, or ignoring our own fears. Fear is defined as, “A distressing emotion aroused by impending danger, evil, pain, etc., whether the threat is real or imagined; the feeling or condition of being afraid.”

  • A specific instance of or propensity for such a feeling.
  • To regard with fear; be afraid of.
  • To have reverential awe of.
  • To consider or anticipate (something unpleasant) with a feeling of dread or alarm.
  • To feel apprehensive or uneasy.
  • To have fear; be afraid.

As a refresher, fear is one of the strongest and most destructive emotions one can have if left unchecked. It’s also a lifesaving emotion if properly heeded, and potentially life-ending if completely ignored. On the other hand, our own fears well understood, well regulated, and diligently heeded, can help us thrive in situations where others may not.

Stopping Unnecessary Losses

The perception of risk, perceived potential for loss, and fear of both will make you miss out on not your money and much of the life you could have lived otherwise if they are ignored. They have the potential to take other things from you as well, not the least of which are the people you care about. This isn’t hyperbole; it’s fact. Let’s stop the unnecessary losses today.

All of this is so important. Life is unbelievably short, even though some days feel much longer than others. The reality is that, if we live to be 100, we will have lived for just 36,500 days.

Kids Say the Darndest Things

Many of you know that I came to this realization after a conversation with my then 5-year-old grandson, Braxton. He and his cousins were running around in my backyard like little boys will do. I was sitting on the patio and watching a race or a football game when Braxton ran up to me and said, “Grandpa, have you been alive for like 100,000 days?”

I laughed and said, “No buddy, I’m only 50-some years old.” “How many days is that?” he asked. I responded, “How many days are in a year?” He didn’t know, so I went through the math with him. I explained that if there are 365 days in a year, I will have only been alive for 36,500 days if I live to be 100.

-HUGE PAUSE-

Believe me when I say that I was as surprised by the answer as he was! ONLY 36,500 days?!?! And I’m already past the halfway mark if I make it to 100!! Mercifully, the boys moved on and left me with my now turbulent thoughts. I have not thought about life and its choices, trials, gifts, tradeoffs, blessings, or certainty the same since. I don’t think I ever will. That realization permanently changed my perception of life and how I choose to live it.

For your amusement (or terror), I’ve put a chart at the end of this article. It lets you know how many days you have left if you are one of the lucky ones that makes it to 100, and how many days you have left if you just make it to average life expectancy. According to the CDC in 2018, that was 78.7 years (76.2 for males and 81.2 for females is 81.2). Are you starting to see where this is going? Good!

Three Critical Questions about Risk Management

So, let’s talk about these following risk management-related questions.

  • What risks are we managing?
  • What are we afraid of losing?
  • Are we worried about the wrong things?

I fear that too many people are trying to manage the wrong risks. They have unrealistic expectations about their ability to mitigate those risks. Those people are afraid of losing something that matters far less than the things they TRULY care about. They spend too much time worrying about things they have NO control over. Let’s start with the risks.

What Risks Are We Managing?

Remember, the clinical financial definition of risk is, “The chance that an investment will lose value.” That is the risk that almost all my risk management conversations revolve around when it concerns their money. It’s natural and diligent to consider that an investment may lose money at some point. It is quite unnatural and unhealthy to obsess over the potential for, or the realization of, an investment losing money.

Every investment you can think of—and some things that people call investments that really aren’t—has lost money at least once in recent history. Every. Single. One. Without exception. Stocks, bonds, coins, currency, precious metals, commodities, land, homes, art, collectibles, antiques, commercial real estate, and money market funds have all lost money at some point in the last 30 years.

So, if everything can and does lose value, even if it is briefly, is it rational to obsess over the possibility that it might occur again? I would argue that it is not. Time spent worrying about things you can’t control is, by definition, time wasted.

Let’s be clear, the possibility of an investment losing value is 100% out of your control. If you truly have zero tolerance for investment loss, you have zero business with anything but a checking account. But that is almost never the case.

Having Your Proverbial Cake and Eating It Too

Most of the time, people want to have their proverbial cake and eat it too. What that sounds like coming at me from across the desk is, “I want to make as much money as possible, but I don’t want to lose any.”

If given a long enough time on the horizon, that can be a reality. However, that mindset usually has a self-imposed peak of days to weeks, not years. That causes them to focus unnecessarily on very short-term fluctuations in their account balance and lose sight of the bigger picture and the things that are TRULY important in their lives.

Money is not the most important thing in life for all, but it’s the shallowest and most jaded among us. That’s just a fact. We all value other things in our lives FAR more than we value money itself. Money is the tool we use to gain access to, participate in, and take care of the important things and people in our lives.

In retirement, money is the economic engine that powers our lifestyles, helps us fulfill our commitments, and gives us the freedom to enjoy however many of our 36,500 days remain. Money is freedom. That is, unless you allow yourself to be enslaved by it. In that case, it is a harsh task master with a nasty temper and has no one to focus on but you.

Allowing the task master money to rule your life is something I very strongly discourage. It exacts a high price from you even as you serve it. More on that later. Let’s move on now to loss.

What Are We Afraid of Losing?

As we did with risk, let’s look back at the clinical financial definition of loss. It is, “The amount by which the purchase price exceeds the selling price” or “Decrease in amount, magnitude, value, or degree.”

At the risk (no pun intended) of repeating myself, no one is fond of losing. That applies to money and almost everything in life. Losing isn’t fun, but it’s a reality. Losing can be beneficial if we learn from or become better because of it.

Before everyone got a participation trophy, sports and games taught us to lose gracefully and try to be better next time. Sadly, that’s gone by the wayside in today’s bubble-wrapped society. Self-esteem and equality of outcome have replaced life lessons and perseverance, but that’s for another article.

I’ve learned over the last nearly 20 years that kids aren’t the only ones who don’t know how to lose gracefully anymore. There are several adults that suffer from the same propensity to throw themselves on the ground and flail about when things don’t go their way. Maybe not literally, but certainly figuratively.

Financially, this unsurprisingly manifests itself as fear of loss. It’s the fear of losing money and unknown consequences of loss to be more exact. This isn’t necessarily irrational. Trying to anticipate how the unpredictability of a future event may affect your ability to do the things you want/need to do is wholly appropriate. In fact, it’s what we do here every single day. We do this in order to do a couple of very specific things.

  • To identify what an individual or couple’s money needs to do to sustain their lifestyle at a level that they have articulated to us as ideal.
  • To understand how much loss their portfolio can withstand in any given year and still meet the requirements demanded of it by the goals set forth.

Are We Worried About the Wrong Things?

Those two things allow us to determine their probability of adjusting their lifestyle due to unavoidable market fluctuations. We use decades of market experiences to model likely outcomes—good and bad—so that the individual or couple can proceed with confidence. We call this living your one best financial life.

What it means in practice is the ability to enjoy the things in life that truly matter to you, unencumbered by the worry of whether your money is going to last for the remainder of the days you are blessed with here on earth.

Some people simply can’t process this deeply enough that it never connects with whatever part of the brain that controls rational versus irrational fear. Therefore, they can’t allow themselves the peace of mind that we so diligently attempt to provide.

This inability can lead to losses that are far more devastating than financial losses. I know, because like the Farmer’s Insurance commercial says, “We’ve seen a thing or two.” More on this shortly. Let’s move on now to fear.

The Thief We Call Fear

Fear is one of the strongest and most detrimental emotions we can have where our money is concerned. Greed is its only equal, but we’re going to leave greed alone in this context, though, and focus on fear.

Fear is the natural and unavoidable link that ties the perception of risk and potential for loss together into one big unhappy bundle of emotions. Having undoubtedly been around overly-emotional people during your life—or potentially being one yourself—you know how uncomfortable it makes you or the people around you.

I’m not saying that emotions are bad because they certainly aren’t. Emotions are a natural phenomenon of being human. We all have them. We need them. Emotions can help us sense things that may not be immediately recognized visually or audibly. It’s like when you meet someone who you just don’t have a good feeling about, and then they prove you right. But what about when you meet someone you don’t have a good feeling about and they prove you wrong? Those feelings, emotions, senses, can absolutely help us. However, they can also fool us. Like the love of money, they can rule our thinking and our lives.

Being Struck by the What-If Scenarios

The reason I call fear a thief is because it steals all the available space in your mind that you don’t consciously or subconsciously guard against it taking. If left unchecked, it can become all-consuming and paralyzing.

If you’ve ever witnessed someone who was paralyzed by fear, you know it isn’t a made-up thing. They literally don’t have the capacity to move because their mind is focused so intently on what negative thing might befall them if they do. The what-if scenarios flash in front of their eyes like the flickering of an old reel-to-reel movie projector showing vivid images of their impending fate. It’s horrific and has no place in one’s life, financial or otherwise.

The Great Fear from the Great Recession

During The Great Recession, which lasted from October 2007 to March of 2009, I witnessed this paralyzing fear daily. People literally did not know what to do. They were terrified that whatever they did was going to be wrong.

In that period, we were in the office at 6:30 a.m. and didn’t leave until 9 or 10 p.m. Our goal was to talk to and help as many people as we physically could in the time we had available. We did everything we could, but we couldn’t keep up. There were five of us sitting in meetings every hour on the hour, all day, every day.

If you’re doing the math in your head, that’s a minimum of 45 meeting slots a day. It still wasn’t enough. People who were being ignored by their current firm, or who had no help at all, were desperately trying to get in at the earliest possible time. Sadly, many times that was two weeks out from the day they called.

Mercifully, the bottom came in March and the fear subsided for most people. However, the fear of a repeat of that event still haunts a surprising number of people who lived through it. That fear has robbed them of the one thing they desperately need and want: peace of mind. Even though fear can be a thief, it doesn’t mean it always is. Let me explain.

Good Fear vs. Unhealthy Fear

All About Your Amygdala

The amygdala is a cluster of almond-shaped cells located near the base of the brain. We all have two of them, one on each side of the brain. They help define and regulate our emotions and preserve memories and attach those memories to specific emotions.

The amygdala also activates the fight-or-flight response in us. This involuntary response to imminent danger helped early humans respond to threats to avoid being injured or killed. When that part of your brain senses danger, it tells your brain to pump out stress hormones, preparing your body to either fight for survival or flee to safety.

This disables your frontal lobes, which are responsible for voluntary actions like reasoning, thinking, movement, decision making, and planning. In other words, your amygdala hijacks your frontal lobes. Today, in a generally less dangerous world, that response is more likely to be triggered by emotions such as fear, anxiety, aggression, and anger. Those common emotional triggers can suddenly cause illogical and irrational reactions. If you want to read more about this natural phenomenon, I encourage you to read Healthline’s article, Amygdala Hijack: When Emotion Takes Over.

Good Fear

This natural reaction to a threat can be classified as a good fear. If we find ourselves in real danger, a healthy dose of fear can help us survive that situation by causing us to take either offensive or defensive action to mitigate our exposure to that threat. Consider these threats and how good fear can be helpful.

  • Avoiding being eaten by wild animals.
  • Overcoming a bully in school.
  • Getting out of a bad situation.
  • Not driving further into a storm or crossing a flooded roadway.

That kind of fear is healthy and necessary. It helps us live to see another day or makes our lives better because we avoided something that might have seriously negative consequences.

With good fear though, the frontal lobes still eventually intervene and regain control. The frontal lobe receives the information that the amygdala sends and processes the information to determine if the danger is real. If danger is not imminent, the frontal lobes help you determine what to do in response to the stressor.

Unhealthy Fear

Unhealthy fear is fear that never lets the frontal lobes do their job. The amygdala is allowed to run amok, like a 3-year-old in a toy store while his mom is busy taking selfies to post on Instagram (or whatever gram they use these days). Sidenote: Please don’t tell me you don’t know who this mother is. We’ve all seen her. She’s everywhere, like a Chuck E. Cheese on wheels. God help us.

This irrational fear that comes from the failure of the frontal lobes to step up is obviously problematic. We all suffer from it from time to time. The ability to control that irrational fear is a concept know as emotional intelligence.

Emotional intelligence requires practice, but eventually the frontal lobes remember that they are the adults in the room. The frontal lobes reign in the out of control 3-year-old and remove the child from the store.

Given enough practice, the frontal lobes might make their point by giving the child a little booty-whipping in the car. Lord knows I occasionally need my frontal lobes to step up. I’m not casting any aspersions here because I fully understand that I struggle with this issue as well. So, if I suggest that some of you need to reign in your 3-year-old amygdala, know that I’m doing it out of love. I’m continually trying to reign mine in too.

The Manifestation of Fear

I apologize that it’s taken nearly 4,000 words to set the stage for the larger point of this article. However, it’s fundamental to understanding what I meant in the title, Redefining Risk Management: Don’t Miss Out on Your Money. I’m convinced I could write a lengthy book on this subject and still need to omit content for brevity’s sake.

The perception of risk, possibility of loss, and fear of both, manifest as one single emotion: fear. Fear is the biggest risk that most people face in their retirement, whether they know it or not.

Markets will always go up and down. Prices will almost always rise. Social Security will never keep up with inflation. Medical care will always be more expensive than it was the year before. Presidents will come and go. Congress will continuously change between red and blue. Taxes will always change, and no, you can’t avoid them.

Creating a Plan That’s Best for You

Those are just some of the facts of life, especially in retirement. They can cause some people to feel uneasy or fearful about their future. A well-crafted plan that accounts for the what-if scenarios and contains contingency plans is the best defense against the risk of fear. That is, if you allow it to be.

It’s our job as your trusted advisors to measure, assess, monitor, and mitigate market and investment risk to the greatest extent possible. That is part of what you pay us to do. The other thing you pay us to do is to look out over the hypothetical length of your retirement lifespan and determine how much investment risk you NEED to make your goals a reality, and then manage to that level.

Some of you need more risk management, some of you need less, and some of you don’t need any. Almost all of you need a different level of investment risk than you think. These are the very real risks that you have asked us to manage for you. We gladly do it so that you can enjoy your retirement, knowing these risks are under control and your future is secure. Most importantly, we do it so that you can live free from the detrimental effects of fear.

What it all boils down to is this: FEAR IS THE RISK WE MUST MANAGE WITH THE GREATEST DILIGENCE! Full Stop! Everything else we do is meaningless if we can’t/don’t manage fear.

The reason is simple. Some things are irreplaceable. Fear can cause us to lose them. At the risk of being repetitive, we all have a limited amount of time on this earth. Every day is precious.

10 Things We All Value That We Can Lose Due to Fear

If we’re lucky, we have all 36,500 days. Statistics tell us that only about 10 percent of us will get that many days. Most will get some number less, and some will get substantially less.

For that reason, time is first on this list of 10 things we all value that we can lose due to fear. There are undoubtedly more than 10, but these are the 10 I came up with as I was preparing for this article.

  • Loss of time
  • Loss of confidence
  • Loss of control
  • Loss of experiences
  • Loss of opportunities
  • Loss of trust
  • Loss of love/companionship
  • Loss of self-worth
  • Loss of lifestyle/living your life
  • Loss of the use of your money

My belief is that they are all equally valuable and tragic to lose. Each of you would likely order the list slightly different than I did. So, other than time being the first item on the list, there is no order of importance. They are all important to all of us.

Look at these 10 things that fear can cause us to lose if we don’t manage it. If you are fearful, think about how freeing it would be to give that fear up and to get back some of these things. If you aren’t fearful, think about how unmanaged fear may be affecting someone you know and/or care about. Alleviating that fear might change their lives for the better.

I’m going to tackle each one of these individually, using the lens of my personal and interpersonal experiences to help clarify what I mean by each. Hopefully I can bring perspective into the conversation about why unhealthy and unregulated fear must be managed. In other words, we’re going to take the amygdala to the car for a little attitude adjustment!

Loss of Time

Kenny Chesney, a country music star who I happen to be a huge fan of, published a song titled, Don’t Blink, in 2007. It was on his, Just Who I Am: Poets and Pirates album. The song tells the tale of a news anchor interviewing a man who is turning 100 (he got his 36,500 days!). The news anchor asks the man, “What’s the secret to life?” The chorus of the song is the man’s answer.

Don’t blink, just like that you’re 6 years old
And you take a nap
And you wake up and you’re 25
And your high school sweetheart becomes your wife

Don’t blink, you just might miss
Your babies growing like mine did
Turning into moms and dads
Next thing you know your better half

Of 50 years is there in bed
And you’re praying God takes you instead
Trust me friend 100 years
Goes faster than you think, so don’t blink

It’s a truism that we first hear as youngsters from our elders, but one that we come to know as fact as we get older. Time flies! It doesn’t care if you are ready to move on, or for the next thing. Times moves on and waits for no one. It’s eerie that Kenny summed up how fast life seems to go by in just 81 words, but also fitting.

Control Is an Illusion

Why would we waste a single second of our brief existence worrying about things that we have absolutely no control over? I honestly don’t know, but I know it’s a human tendency. The reality is that control is an illusion.

We can’t control other people, the weather, the market, family we’re born into, or much of anything. What we can control are our thoughts, actions, reactions, emotions (if we work at it), and whether we honor our commitments. That’s about it.

To be sure, this simple concept could be an entire chapter or more on its own. If we control the things that we CAN control, we have the best chance of living an extraordinary life that’s free of unregulated fear.

Everything else we worry about is a waste of our time because we can’t affect it. If we can’t affect it, it’s not worth our time to worry about it or be afraid of it. The sooner we come to grips with that reality, the better we become at living our best lives and being someone that people want to emulate.

Loss of Confidence

People who have their fear under control are confident people. They are not free from fear, just unhealthy fear. Fear, unrestrained, will cause you to lose your confidence.

It’s not a matter of if you’ll lose confidence, it’s when. If you don’t address your fear (whatever it is), it will gradually begin to work on your psyche every day.

Let me give you two examples. I’ve heard these same stories from a multitude of individuals, easily over 100 of them, in the last dozen years or more since The Great Recession ended. They are not uncommon stories, so if you see/hear yourself in them just know two things: I’m not talking about you specifically and you’re not alone in your experiences.

Story 1

The first example goes something like the following statement, with different details and timing depending on who was sharing their story with me.

“I just knew, in the depths of my being, that something was wrong. I feel like I knew it as early as 2005 or 2006. Something just didn’t feel right, and I kept telling myself I should make a change. But as usual, I put it off because I thought I might be overreacting to what I was seeing. After all, my friends weren’t worried, and the market just kept going up.

Finally, I couldn’t take it anymore. I sold everything in September 2007 and just sat in cash. I was lucky that I did that because I missed the huge drop in the market. The problem is that I’ve been setting in cash ever since because I’m too afraid to get back into the market. I’ve missed all the gains in stocks over the last (insert number here) years, and I don’t know what to do. I’m literally paralyzed with the fear of getting back into the market at the wrong time.”

Story 2

The second story, with the same caveats as above, goes as follows:

“Man, things were good! I was making money hand over fist! All my friends were worried that we might be in a bubble, but I wasn’t in the business of taking investment advice from people who thought the sky was falling.

After the Dot-Com Bubble crash in 2002, all the experts were saying that the Federal Reserve would never let the market crash like that again. They said they had the ability to keep things afloat and had “circuit breakers” that would stop it before it got too bad.

So, when the stock market started getting a little rocky in 2007, I didn’t give it a second thought. I got a bit nervous when things really started falling in 2008, but I didn’t panic. I hung in there like I thought I should. One day, I realized that the market was down by over 50%. The thought that I might lose everything came over me like a wave. 

The way I saw it then was that I HAD to sell everything RIGHT NOW or I would wind up broke in the coming months. So, I sold everything to cash. I’ve been sitting in cash ever since because I absolutely cannot afford to go through another crash again. I’ve missed all the gains for the last (insert number here) years because I’m too afraid of repeating that experience!”

From Confidence to Fear

Neither one of these stories ended with a confident person. They were both confident in the beginning, either in their instincts or in their ability. However, by the end of their stories, they had no confidence left at all. It had been replaced by abject fear.

The fear stole their confidence or at the very least overrode it for an extended period, causing undue stress and self-doubt. Remember, the function of the fight-or-flight response is to keep you safe in the moment. Then, the more emotionally rational frontal lobes are supposed to take over, assessing the current situation for what it is, not what it was.

Loss of Control

When that doesn’t happen, you are no longer in control; your 3-year-old amygdala is. For most of us, a loss of control is not something we are comfortable with. Again, it’s human nature to want to control things. But a loss of control is absolutely another side effect of fear.

These two examples illustrate losses of confidence and control. Note that both stories end with the person unable to move when they know they should. If you’ve ever had a dream where you must run away from something or fight someone, but your legs and hands are so heavy that you can’t run or swing your fists, then you know how these people feel.

Mercifully, we wake up from dreams like this in a relatively short time. Tragically, some of these people have felt that heaviness for years and years. You can see it in their faces and hear it in their voices. It’s a huge weight to carry. I don’t want anyone to have to carry that weight around. The only way to avoid it is to manage the fear and tame it.

Loss of Experiences

Left unchecked, the next thing that fear will take from you are the experiences that you dream of. That happens when fear takes more room in your head than it deserves. What do I mean?

Psychologically, there are three ways that people make decisions about money. We think of them as fear (the protector), commitment (the giver), and happiness (the spender). We all have some of at least two of those in our psychological make-up. Most people have some of each. As a rule, there is one that is dominant in each person.

The Protector

I’m going to talk about the fear type, or the protector, since that is my primary profile. I’m 57% fear, 43% commitment every time I take the test. It doesn’t change. The fear profile is one that focuses on the pile of money.

The pile can never be big enough for the fear type because they are always processing what-if scenarios in their minds. This is not a negative thing necessarily, until it gets out of control, which it can. Someone who has a very high percentage of their financial psychological make up in the fear category may put off doing things that are quite important and meaningful to them. And it’s simply because their fear profile keeps them from spending the money to do it.

Here’s a personal example. For several years, I had children on both coasts. I had one in California and one in North Carolina. But let’s be honest, I have children scattered everywhere. That’s what happens when there are seven of them.

Remember, I’m 57% fear and 43% commitment. For the record, my wife is 57% commitment and 43% fear. It’s a constant tug of war for us mentally. We both want to give as much as we can of our time and resources to the people we care most. At the same time, we have the desire to make our own pile as big as we can to be prepared for the never ending what-if scenarios.

With kids on both coasts, there was a desire to spend as much time with them as possible. My wife and I would have loved to be on one coast or the other every couple of months. We had the financial resources to do so. But we weren’t. It’s not because we didn’t want to be, but because the fear profile took up too much room in our heads and crowded out the commitment.

The fear is super easy to rationalize in your head at the time. Tickets are so expensive. I hate the airport environment. What about our dogs? Pet care costs so much. Who’s going to take care of the yard and the plants? There goes more money, Blah, blah, blah, blah, blah!!!

You know what’s funny? When you put it on paper, you see just how STUPID it all is. Fortunately for us, it was a short period that our kids were on both coasts. All the kids are now within a day’s drive, and some are very close by. But the loss of the experiences that we COULD have had will last a lifetime. It’s not that we didn’t have any, but we didn’t have as many as we otherwise might have had we allowed the commitment to override the fear.

Loss of Opportunities

Again, managing the fear is THE most critical thing we can do to help people enjoy their retirement. We want everyone to live their one best financial life. Fear takes up as much room as you give it. If you give fear too much room, and it’ll take away opportunities too.

Opportunities don’t stop presenting themselves once you’ve retired. Arguably, they get more frequent. They don’t have to be investment opportunities either. Think about all these opportunities.

  • Joining friends on a trip.
  • Moving to a resort location or the lake.
  • Participating in a civic or social group.
  • Volunteering
  • Serving at your place of worship.
  • Being a mentor to young people.

I could go on and on. When you are retired, you have the time to do all kinds of things that you didn’t have the time to do when you were working. However, many clients tell me they don’t know how they ever had time to work because they are so busy in retirement.

We tell ourselves, “Maybe I’ll do that next year,” “maybe if the market goes up just a little bit more, I can afford (X),” or “now is just not a good time for me.” Folks, if not now, when? God didn’t promise any of us tomorrow.

In fact, there’s a very real possibility that more than one person who was still with us when I started writing this article, and needed to hear this message, is no longer with us by the time you get to read it. My question then is this. How many of your remaining days are you going to allow fear to make you put off living your best life?

Loss of Trust

Let’s move on to trust now. You might be asking, what does fear have to do with trust? That it is a fair question. Trust is an interesting phenomenon. There are endless inspirational, spiritual, relational, and other quotes devoted to the topic. It is interesting that trust is an external and internal expression.

Ralph Waldo Emerson said, “Self-trust is the first secret of success.” I can’t agree with him more. If you don’t trust yourself, you will either struggle to trust anyone or anything else or you will blindly trust anything or anyone else but yourself. Neither of these is healthy.

To see how fear affects this self-trust, we need to go back to the two stories from earlier. Not only did the individuals in both examples lose their confidence and control, but they also lost their self-trust. That compounded their feeling of paralysis.

If I’m not confident and feel like I have no control, how can I trust myself to make the right decision? It’s just another example of fear taking up all the available space in your brain you allow it to take.

That same fear can also cause others to lose their trust in you. Where you were once confident, reasoned, and thoughtful, fear can cause you to be doubtful, illogical, and seemingly uncaring. These are not character traits that anyone would aspire to, and certainly not ones you would chose voluntarily.

Trust Is Built with Consistency

Those poor character traits are the result of too much focus on the thing you fear and not enough focus on the things you love. It really is that simple. When you allow that to be your reality, people who trusted your judgement and commitment to them may start questioning that trust.

One of the quotes about trust that I believe illustrates this point in a comical fashion comes from Lincoln Chafee.

“Trust is built with consistency.”

If you don’t know who Lincoln Chafee is, he was among other things, a Republican U.S. Senator from Rhode Island from 1999-2007. He changed his registration to Democrat in 2013, then to Libertarian in 2019. All this makes his quote on trust that much more entertaining, even if not less true!

Controlling our emotional reactions to the fear response is critical to maintaining the consistency that Chafee was referring to. That control is not only for those who count on us to do so, but for our own self-trust and sense of confidence and control.

Loss of Love/Companionship

Failure at this level will inevitably lead to the next item on the list: loss of love and or companionship. You might think that this one is a stretch, but I can assure you it is not. I will not name names, but I’ve seen it firsthand. It happens more than you think.

To understand this, you only need to refer to the trust issue. Anyone who is a true friend to or truly loves a person will first seek to understand what is going on with them and help them through it. It’s how most of us are wired. We don’t want to see those that we care about living in a state of pain, fear, or unrest. Over time, though, things can begin to break down if the person being controlled by their fear (even if they haven’t identified it as fear) isn’t willing to entertain and eventually focus on more rational responses and behaviors. The first thing to go is trust. That’s followed by the desire to be around the negative behaviors and attitudes.

All but the most loyal among us will at some point throw up their hands and walk away. They choose not to engage in futile efforts that waste THEIR time. They take their focus off the other things in their lives that they ALSO care about. That leaves the person all alone, incapable of handling their fear in an emotionally intelligent way. Sometimes they will be left with half the money they were so focused on in the first place. The losses didn’t come from anywhere they were afraid they would. Do you get the point?

Loss of Self-Worth

That leads to one of the saddest things that unregulated fear can take from you: your sense of self-worth.

There is a propensity, mostly (but not exclusively) among the male population to focus on an arbitrary number as a sign of their success and worth. It’s almost universal, except for the tofu boys we see too many of these days. For most males, these are a few examples.

  • If I make (X) dollars a year, I will feel successful.
  • If I can lift (X) pounds in the gym, I’ll show the guys how strong I am.
  • If my portfolio has (X) dollars in it, I will have made it.
  • My car goes from 0-60 in (X) seconds!
  • I hit a drive (X) yards!

We all do it, and our partners roll their eyes at us and say, “Whatever.” They say whatever until it becomes an obsession that we can’t let go of and that they can’t live with. That’s where the previous example took us.

How would you feel if you allowed your single-minded, fear-driven focus on a made-up, arbitrary number to cause the one person you cared most about in your life to walk away from you? Think about that. How would you feel?

Do you think your self-worth might take a beating? Would your self-worth feel like the 3-year-old getting taken out of the toy store and receiving an attitude adjustment?

As a reminder, this isn’t a hypothetical scenario. I’ve witnessed it, counseled through it, and assisted in cleaning up the aftermath. Not once has anyone ever come up to me and said, “I really wish I would have focused more on the money.” Not. One. Single. Time.

Slap the amygdala, splash water on your face, call in the frontal lobes, and move on.

Loss of Lifestyle/Living Your Life

Each of us has dreamed of what we wanted our lives to look like on some level. That starts with idealistic dreams of childhood, many of which never materialized. It goes on to more attainable and tangible dreams of working adulthood.

Many of us had mentors that gave us advice on attaining goals. For me, that was Jim Rohn. He was a motivational speaker and life coach, and author of many books, including The Art of Exceptional Living. The advice given in that book is life changing. I could spend hours talking about his writings.

One thing he constantly urged you to do was write things down. He was a big believer in keeping a journal to track your progress and leave a legacy of your thoughts for your kids.

Others, like Earl Nightingale, urged you to put up a picture of the thing you aspire to on your wall or refrigerator. The picture serves as a reminder of why you are doing the things you do every day and to visualize achieving your goal. One of his quotes that I’m most fond of is “You are now, and you will become, what you think about.”

Things like this have helped millions of people plan for and attain the life they aspired to during their careers. Dream big, do the things you should, sacrifice where you must, and keep your mind focused on the goal.

Then, one day, you’re there. All the sacrifice and hard work paid off. It’s time to retire and enjoy the fruits of your labor. You have planned for this day for years. The plan includes the smallest details of where you want to go, who you want to spend time with, what you want to spend on, and what your legacy is going to be.

Switching Gears from Your Career to Retirement

You’re ready to begin the next chapter of your life, but you forgot to plan for one thing. It’s the thing that almost NO one considers without the help of someone who has been there before. How do you retire your old way of thinking and switch your brain to retirement thinking? Your old way of thinking doesn’t work in retirement. It ruins it.

The financial focus pre-retirement is saving. The financial focus post-retirement is spending the money you’ve saved to fund your retirement. However, your brain can’t make that switch if you haven’t prepared it. Your old way of thinking becomes afraid of the new reality (here comes fear) and starts in with a whole new set of what-if scenarios that it should have come to grips with long before retirement.

It’s far from unusual, so if this is you, you’re not alone. Before you know it, rather than executing on the plans you made for the retirement you’re now living, you begin to put things off because you’re uncertain and afraid. One thing becomes two, two become four, and so on.

Loss of the Use of Your Money

Pretty soon, you’ve convinced yourself that not only can you not execute on the plan you’ve funded, but you can’t afford your basic lifestyle.

Then, you start cutting expenses like you did back when you were a broke 20 something starting your family. But you’re not broke. To borrow a quote from my brother, Dean, on this phenomenon: “You’re never going to be broke. You’re just going to live like you’re broke.”

Some of you have heard him say this to you. He’s not wrong. But why would you live like you’re broke? You’ve put in the time, work, sweat, and tears to make sure you NEVER will be broke. The answer is simple. It’s the thing I’ve been discussing for the last several thousand words: fear.

Fear will steal your retirement dreams from you. It doesn’t just take them from you; it steals them from the person who sits next to you or across from you at the dinner table too. They often say nothing and accept the fact they aren’t going to enjoy the retirement lifestyle they’d planned together even though there’s a pile big enough to do the job.

Fear and the accompanying, seemingly never ending, what-if scenarios that run through your mind don’t care that they’re wasting your time or your life. It’s their job. Your job is to stop them or be forced to accept the results of your failure to do so. There is no other option.

Is Living to 100 Something You Hope for or Are Fearful of?

Much of the fear in this area stems from the number I brought into this conversation early on: 36,500 days. Whether out of hope or worry, we tend to anticipate that we could be in the 10% of people who live to be 100. To be honest, if I was told that my airplane had a 10% chance of crashing before I landed, I don’t think I’d get on board. So, I’m not unsympathetic to the unease that many feel.

However, I have to say that for most people we plan for, we assume that one or both of a couple will make it that far simply BECAUSE of that 10% chance. We’ve already done the work to ensure that you wouldn’t wake up broke on day 36,501. We do that so that you won’t succumb to the fear of outliving your money. Allowing the fear to steal the lifestyle you dreamed of and planned for is what we actively to precent. We want you to live your life to the fullest.

An All-Time Tragedy: Missing Out on Your Money Altogether

Almost nothing in our jobs is more tragic than watching this scenario unfold in real time. There is one thing worse, and it’s in the title of this article—missing out on your money altogether.

At its least tragic, missing out on your money means that you were just too afraid to use any of it for its intended purpose. You wind up living like you were broke—just like Dean warned. Dying with a giant pile of money that you never could make yourself enjoy is an all-time tragedy.

To add insult to injury, NO ONE who inherits that money will attach the same meaning to it as you did. NO ONE. A daughter or son may come close for a time if you’re lucky. But eventually, that money will wind up in the hands of people who aren’t aware of the years of sacrifices you made. They’ll spend it all in short order on stuff you never would have spent it on.

You didn’t use it for your own enjoyment, but the second generation who ends up with it is going to use if for theirs. Your money could go to someone else’s shiny cars, and shiny passengers in said shiny car. There are many other ways your money could be wasted, but you don’t have to miss out on your own money. It’s preventable.

Never Having a Chance to Miss Out on Your Money

The MOST tragic example of missing out on your money is never getting to use the money because your number came up before you had a chance to start. That example can either be in the form of an unexpected, untimely passing or a decision to postpone retirement to a date beyond your body’s expiration date. Both are tragic. One is fate, the other is choice.

None of us can do anything about the hand of fate but mourn that it strikes too early for too many people that we know, love, and care for. They had no choice in their early exit and no chance to execute their plan. The fact that they missed out on their money is the least of our concerns as those who remain here without them. But the ones with the choice are the ones I want to address.

Every Day Is a Gift

I can’t stress enough that we all get a limited number of days here. None of us know what our number is. Is it 36,500? Or, like my father, is it 24,455? Or is it 10,950 like my uncle? We just don’t know. That is why we must treat every day as a gift and make the most of them.

I’ve had a lot of people tell me something like, “I’m going to die in the saddle because I love what I do. I can’t imagine not working.” As those words are coming out of their mouth, their spouse is usually looking at me with pleading eyes, begging me to talk some sense into said workaholic.

A Plan Rooted in Fantasy, Not in Fact

Usually, I simply need to remind them that their plan is rooted in fantasy rather than fact. There are factors well beyond their control, like health and the continued viability of the company they work for. Their cognitive abilities will also have an impact on that plan that they can’t know or foresee.

Additionally, their desire to work forever is usually in direct opposition to their spouse’s desire to do something else with the rest of their life that resembles retirement. After all, the plans they’ve likely made include them both. Those plans can’t be realized if one of them decides not to participate and to work instead.

The other issue is pushing retirement out too far because you think you HAVE to. I’m talking about not living to enjoy the retirement you were planning for because your retirement date was beyond your personal expiration date. More times than not, this is a fear response to the possibility of running out of money. This is what planning is for.

Reaching Financial Independence

We know for our planning clients exactly when they’ve achieved financial independence based on their individual circumstances and priorities. That date of financial independence is the day beyond which they never have to work again. Any day they do so is a day they chose to, not because they thought they had to.

It doesn’t always mean they retire immediately. As anyone who has done it knows, you must retire TO something and not FROM something.  Finding something to retire to can take some time. For most, it comes in short order. For others, it takes a little longer. Some need extra help, while others need a good shot from a cattle prod.

I’ve spent a lot of time here hopefully making the case that you must not allow fear, especially about money, to ruin your life. You must take control of it. Assess whether your frontal lobes are talking to you or if your amygdala has hijacked them and is running amok with your emotions.

I joke about this because it’s funny, but it is a deadly serious issue. It’s one that has real-world consequences that can be irreversible.

Live Every Day with a Purpose

When you think about it, 36,500 days is not a long time to do all the things we want to do in life. Time wasted on things we can’t control is time we’ll never get back. We’ll regret having spent that time frivolously when we’re on our way out. Don’t do that to yourself. Don’t do that to your loved ones.

Live every day with a purpose. Put your loved ones first. Give as much as you can. If you do these things, you will absolutely live your one best life, financial and otherwise. Fear will have no place to gain a hold of your mind.

Don’t miss out on your money, plans, time with your loved ones, and your life.

–Shane Barber, Partner

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.